Fashion biggies shut India sourcing arms

BANGALORE: Global apparel brands that are reeling under the impact of weak consumer sentiments worldwide are beginning to pull back their direct sourcing operations from India.

In recent weeks, fashion clothing giant Timberland closed down its India office and handed over sourcing functions to thirdparty management firm Li & Fung. Another American fashion icon Liz Claiborne is believed to be reviewing local sourcing operations as retailers go in for cost cutting to survive a market gloom, sources said. Liz Claiborne���s India sourcing, mainly centred around its Mexx brand, is estimated at $100 million. Timberland���s local sourcing was smaller at around $30 million annually.

Observers said sourcing becomes invariably the first casualty in the restructuring moves of most international fashion houses. UK retailer Next rejigged its local sourcing operations sometime back by pulling shutters on the Bangalore office, but has kept its India presence alive with a hub in New Delhi. The developments mark a reversal in India���s sourcing story that saw unprecedented boom in recent years. Several top deck and even relatively smaller fashion apparel and accessories retailers started direct sourcing from the country.

The domestic apparel exports alone are pegged at around $10 billion annually. Independent firms such as Li & Fung and even domestic players like Triburg and Fifth Avenue have emerged as sourcing management partners for global brands at the Asia-Pacific level. Last year, Tommy Hilfiger, following its buyout by private equity Apax Partners, divested the sourcing arm to Li & Fung. ���Sourcing division has several hidden costs, especially in a market like India which is getting expensive . The companies are factoring in the overhead costs of a sourcing establishment ,��� said R Kirshnakumar , CEO, Integra Apparels, part of Ashok Piramal Group.

But retailers like Wal-Mart , JC Penney, Target, Tesco and H&M have been scaling up direct sourcing operations buffered by their economies of scale, which becomes a critical factor and often a difficult one for high-end fashion players. The recent research reports suggest that retailing in mature markets like the US and UK may be in for a prolonged slowdown. UK-based Active Resilience, in its latest report, predicted that the country���s retail sector may face a decade of gloom leading to severe job cuts amidst survival pangs.

This comes in the wake of volatile currency fluctuations���last year���s rupee appreciation rendered India high-cost destination for some brands���that disturbed India���s sourcing industry. ���In the US all retailers are down by 5-10 % so there has been some impact,��� Madura Garments Exports CEO Partho P Kar said.